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During the audit of a company with an August 31, 2020 year end, management refuses to provide for full disclosure of the going concern issue
During the audit of a company with an August 31, 2020 year end, management refuses to provide for full disclosure of the going concern issue caused by COVID 19. However, they were willing to provide the following partial disclosure: Subsequent tes year end, the spread of COVID-19 severely impacted many local economies around the globe. In many countries, businesses are being forced to cease or limit operations for long periods of time. Measures taken to contain the spread of the virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to businesses worldwide, resulting in an economic slowdown. The auditor was of the opinion that this disclosure failed to fully provide for the impact of COVID-19, in particular that the company in serious financial condition and is now operating on a going concern basis. Required a. Explain, with reason(s), whether the situation described above gives rise to a GAAP departure or a scope limitation. (2 marks)b, b. Explain with reason(s) the type of audit opinion that would be provided. Be sure to fully explain the impact on the changes to the standard audit report (unmodified) (7 marks)
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